Realistic web hosting prices?

I believe that many people including myself wonder or have been wondered on how could the web hosting prices of some companies be so low. There must be some catch or their service is scam etc. Asking about cheap web hosting we often get responses such as that if you are serious about your project you would not look for cheap because you would likely run into scam.
What are those "unrealistic" offers anyway? Well, let's take one of a good number of similar examples. I almost picked it randomly. It's really easy to find it since it's practically a trend now. Let our example be PenguinHost.net which offers the following as their professional hosting plan:

Now, i know, i copied it from their site. What however is the first to attract our eyeballs are 2000MB storage and 60 000MB bandwith. And it's all for only $9.95 per month or $7.95 per month if payed annually which is $95.40 per year. Is this realistic? Are they scammers? Some may say yes searching only for hosting services with prices of about $20 or above per month as their "professional" hosting that they can really trust. My sure answer to this will be "no". And i know that many of you will probably agree since i believe this trend has become common and it's been already talked about and explained. The hosting prices are dropping. As a reson to this, i wanted to point out to free software such as linux, mysql, apache and php, the so called LAMP combination that rules this market. It is from my opinion the main reason for that prices got so low in the past few years because there are apsolutely no cost in implementing these technologies since it is free software. What we actually pay for when paying for hosting are mainly the server space and maintainence of servers, and not for the software technology that powers them. It is therefore actually more realistic to expect lower prices then high ones. And here is another positive contribution of the free software/open source movements.
Okay, maybe you'll have some more reasons to add for this. Feel free to do so.

The hosting prices are dropping. As a reson to this, i wanted to point out to free software such as linux, mysql, apache and php, the so called LAMP combination that rules this market. It is from my opinion the main reason for that prices got so low in the past few years because there are apsolutely no cost in implementing these technologies since it is free software. What we actually pay for when paying for hosting are mainly the server space and maintainence of servers, and not for the software technology that powers them.

I would totally agree on this.

But there is something else that also is bringing the price down. Its competition to sell your hosting service and package.

Yes.. i also believe that the competition can be an additional reason. There are alot of hosting servces around, even only in one country such as Croatia. And dropping prices seem to be the best way to beat the competition besides adding on quality and special services.

But it also seems that this availabilty of free server software was one of the main causes for the increasing number of hosts. When the price bars drop lower, many more people can jump in the business, be it reselling or starting from scratch.

Indeed, hosting has become extremely competitive, which in my opinion is the number one reason for the low pricing.

But, for that plan 2G / 60G , is more of a marketing ploy than anything. They know full-well that most clients will never come close to using all that up.
On average, I have found that 1G = 50,000 page views, so at 60G, that's 3 million page views per month... very, very few people will ever need that.

If all their customers used up all their room, there's no way a hosting company can sustain themselves. Also, that 6.95/month is if you sign up for 2 years... and if they go out of business in 3 months??? I never advise anyone to sign up for more than 3 months at a time.

But, for that plan 2G / 60G , is more of a marketing ploy than anything. They know full-well that most clients will never come close to using all that up.
On average, I have found that 1G = 50,000 page views, so at 60G, that's 3 million page views per month... very, very few people will ever need that.

I've been searching for good web hosting sometime ago and came up with Cenvo - http://cenvo.com/ - as the cheapest hosting

service available in India. For a standard personal website Cenvo seems to be the best choice even for small business

companies. Obviously this doesnt hold for large ones but this will defintely invoke small business people and even people who

want to have a personal site of their own for themselves or for a community to register at cenvo for a website.
Cheapest - Rs 750 per year for LAMP - Registration Rs.350 + Rs.400 for the services mentioned below :
10 MB storage
1GB monthly bandwidth
4 MySQL dbs
20 Emails
Unlimited ftp though you'll have to request for it
Though the cenvo mentions PHP 4.3.2 it actually gives PHP 4.3.9 and MySQL 4.0
Additional Disk Space - Rs.500 per block of 50MB per year
Additional Bandwidth - Rs.750 per additional 1GB per year
Dedicated IP Address - Rs.1800.00 per Year
SSL Installation - Rs.500(Requires Dedicated IP) per year

The only disadvantage is the bad customer support. Theres just one person running this and all queries are directed to him and him only.